Singyes drops CB plans after bond default

The Chinese solar panel manufacturer has slipped into further trouble after it was forced to abandon plans to raise fresh capital from a convertible bond sale.
The Chinese government is phasing out subsidies for the solar sector.
The Chinese government is phasing out subsidies for the solar sector.

China Singyes Solar Technologies has fallen into deeper financial trouble. The solar panel manufacturer said on Thursday that its plans to issue convertible bonds had lapsed following a default on its existing liabilities.

The company announced plans in October to sell HK$230 million ($29.3 million) of convertible bonds to refinance its existing debt. But the proposal was dropped on Thursday after it failed to meet certain conditions, including maintaining at least $80 million of cash at the time of the issuance.

Singyes financial troubles were revealed in October when it defaulted on its $160 million 6.75% senior notes. On Thursday, the company admitted that it has also defaulted on Rmb202.1 million ($29.8 million) of its Rmb219.6 million offshore loans.

The company has a $260 million 7.95% bond due February 15, and a Rmb930 million 5% convertible bond due August 8.

As well as these liabilities, the solar company is also suffering under the weight of its onshore loans. These total Rmb2.44 billion and Rmb765.3 million “may be regarded as being in default”, Singyes said on Thursday.

“Singyes defaulted on its $160 million in senior notes which matured on October 17, 2018; the debt crisis has remained unresolved more than one month from its outbreak,” Guotai Junan Securities said in a research report in November. “We believe that this crisis will impact the business outlook of the company. Going forward, we expect the borrowing cost of Singyes to increase substantially.”

The Chinese securities firm downgraded Singyes to “Sell”.

THE AFTERMATH

Given the company’s financial difficulties and the loan defaults, it is uncertain whether it has sufficient working capital to maintain business operations and meet financial obligations, Singyes said on Thursday.

In mainland China, the company is in close discussions with onshore lenders, suppliers, customers, local governments and regulators “to seek their understanding and support and to stabilize the business operations,” Singyes said.

Outside China, the firm has been in close discussions with the lenders, bondholders, overseas suppliers and customers. “Its working capital will be sufficient for its operations at a reduced business scale if such discussions with its stakeholders result in a positive and constructive outcome,” Singyes added.

Singyes revealed that it has reduced production in its two mainland Chinese factories from three shifts totalling 24 hours per day, to one or two shifts totalling eight to 16 hours per day. The company said that it is also "actively exploring" opportunities to sell its photovoltaic power station projects in Guangdong and other Chinese provinces. 

An onshore creditor group committee has been formed by the onshore lenders which will coordinate all lending arrangements with the firm. And an offshore bondholder ad hoc committee is being formed with which the company is working towards a possible restructuring plan.

“Impacted by the 531 policy, refinancing has become more difficult for companies in the solar industry. We believe Singyes is one of the victims in the solar industry downtrend,” said another Guotai Junan report.

On 31 May last year (after which it is named), China’s National Development and Reform Commission, Ministry of Finance and National Energy Administration, announced the “531” policy. This aims to slow the growth in China’s solar sector, mainly by accelerating the phase-out of subsidies. In 2015, China overtook Germany as the country with the world’s most solar capacity.

Singyes said that its ability to meet interest and principal repayment obligations will depend on whether it receives government subsidies on time.

The financial woes of Singyes come after a record number of bond defaults among Chinese issuers last year.

Analysts are debating whether the number and value of corporate bond defaults in China will surpass the record level they hit last year. Chinese financial information provider Wind shows that there has been one corporate bond default in China so far this year; that of food manufacturer Zhongpin Food.  

Last year, 123 corporate bonds totalling Rmb119.9 billion defaulted in China, much higher than the 35 corporate bonds totalling Rmb33.7 billion in 2017, according to Wind.

Another Chinese solar power company, Shanghai Chaori Solar, was one of the earliest domestic Chinese bond defaults in the solar power industry when it failed to pay interest on its bonds in 2014. 

 

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